Thanks to the Inflation Reduction Act, which was implemented after the pandemic has caused drastic inflation throughout the United States, there is a new $7,500 tax credit for a large number of electric vehicles. The Inflation Reduction Act was created in order to encourage companies to build products that will help lower emissions produced by vehicles.
A new portion of the Act had taken into effect on April 18th. This portion will affect the battery sourcing rules, which will cut the $7,500 tax cut in half or even eliminate it completely. This is to help reduce the United States dependence on China and any other country that is supplying the batteries for the electric vehicles. This being said, there are still a number of vehicles that will still be eligible for the $7,500 tax credit.
According to Reuters, one of the top vehicles still eligible is the Ford F-150 Lightning pickup truck. According to the Chief Customer Officer, Marin Gjaja, customers have made the F-150 lightning electric truck the number two electric vehicle brand in the United States last year.
Some models like the Ford Mustang Mach-E, Ford E-Transit, Ford Escape Plug-In Hybrid and Lincoln Corsair Grand Touring will be affected by the drop in tax credits. Their tax credit will drop to $3,750 due to their dependency on batteries from China.
According to Stellantis, the three plug in hybrid electric models stated that the Chrysler Pacifica hybrid is eligible for the $7,500 tax credit, while the Jeep Grand Cherokee 4xe and Jeep Wrangler 4xe qualify for $3,750.
General Motors is supposed to have a few electric vehicles that will be eligible for the full $7,500 tax credit. This should include the Cadillac Lyriq, the Chevrolet Equinox EV SUV, and the Blazer EV SUV. As of now, GM receives the same amount for the Chevrolet Bolt and the Chevrolet Silverado EV will be eligible. The Chevrolet Bolt is expected to qualify for some level of tax credit.
Tesla, the top electric vehicle company arguably around the world, had reported the Model 3 rear-wheel drive credit will be reduced. This is mostly due to the guidance as the vehicle uses a battery made in China.
In order to qualify for the full amount of the Electric Vehicle Consumer tax credits, the vehicles must be assembled in North America. Furthermore, electric vehicles must have income and retail price caps as well.
According to the IRS website, individuals qualify for the $7,500 if consumers purchase a new, qualified plug-in EV or fuel cell electric vehicle. To qualify, consumers must purchase the electric vehicle for their own use, not for resale. Furthermore, they must also use the electric vehicle primarily in the United States. There are also salary conditions, and the modified adjusted gross income must stay under the following: $300,000 for married couples filing jointly, $225,000 for heads of household, and $150,000 for all other filers. The credit is nonrefundable, so individuals are unable to get back more on the credit than they owe in taxes.
The amount of credit individuals qualify for depends on when the vehicle is in service, regardless of what the purchase date is.
For vehicles in service January 1st through April 17th, 2023:
- $2,500 base amount
- Plus $417 for a vehicle with at least 7 kilowatt hours of battery capacity
- Plus $417 for each kilowatt hour of battery capacity beyond 5 kilowatt hours
- Up to $7,500 total
For the vehicles placed in service after April 18th, 2023:
- $3,750 if the vehicle meets the critical minerals requirement only
- $3,750 if the vehicle meets the battery components requirement only
- $7,500 if the vehicle meets both
If you have purchased an electric vehicle within the past few years, you may have been enjoying a tax credit due the Inflation Reduction Act. However, in an effort to reduce dependency on other countries like China for the batteries for these vehicles, many electric vehicles will no longer qualify for the full tax incentive amount. A few vehicles will still qualify for the full amount like the Chrysler Pacifica Hybrid, Cadillac Lyriq, or the Ford F-150 Lightning Pickup truck. A few electric vehicles that will no longer qualify for the full amount are the Tesla Model 3, the Chevrolet Bolt, and the Jeep Wrangler 4xe.
Ship A Car, Inc. is more than capable of guiding you through the procedure if you’re searching for a business to manage the transportation of new or used cars. To get started with a customer support agent, just get in touch with our business at (866) 821-4555.